In the good books
Credit Suisse upgraded Harvey Norman Holdings (HVN) to Outperform from Neutral. Buy/Hold/Sell 5/1/2 Credit Suisse says the FY15 results should show strong sales in large electrical appliances and furniture and a strong performance in NSW. Credit Suisse expects that, as a consequence, sales growth should accelerate and franchise profitability will improve significantly.
Citi upgraded Resmed (RMD) to Neutral from Sell, and Morgan Stanley upgraded from Equal-weight to Over-weight following financial results. Buy/Hold/Sell 4/2/2 Citi says revenue and flow generator sales were better than expected in the fourth quarter and expects momentum in this category to continue in the near term. Morgan Stanley believes the underlying business remains strong, despite a disappointing third quarter, and expects continuing growth in the US market in the first quarter of FY16. (See downgrade)
Credit Suisse upgraded Wesfarmers (WES) to Neutral from Underperform. Buy/Hold/Sell 0/7/1 The broker expects sales and earnings growth from its retail divisions will be in line. The supermarket pricing environment does present some potential for downside. Coal price guidance for the fourth quarter has been incorporated along with the broker’s coal price forecasts.
In the not-so-good books
UBS downgraded Genworth Mortgage Insurance Australia (GMA) to Neutral from Buy. Buy/Hold/Sell 1/2/0 First half results were weaker than expected. The broker has become cautious on the emerging trends in the mining-exposed segments of the portfolio. Capital management remains a positive aspect of the broker’s outlook but further significant returns may be dependent on no material deterioration in the economic backdrop.
Deutsche Bank downgraded Resmed (RMD) to Sell from Hold. Buy/Hold/Sell 4/2/2 After the success of the AirSense range, Deutsche Bank is wary that FY16 will prove challenging with competitor lines being launched. FY15 results beat the broker’s estimates, largely because of a substantial rise in US device sales. Deutsche Bank lowers expected gross margins for FY16. A return to double digit growth in sales is still expected from FY17. (See upgrades)
Credit Suisse downgraded Suncorp (SUN) to Neutral from Outperform following its financial results. Buy/Hold/Sell 0/6/2 FY15 cash earnings were above the broker’s forecasts. The result was assisted by reserve releases and higher earnings on investment income. The share price performance in recent months was justified because of the upside risk to earnings but with the news now factored in the next leg up is expected to be difficult.
The above was compiled on reports on FNArena, which tabulates the views of eight major Australian and international stock brokers: BA-Merrill Lynch, CIMB, Citi, Credit Suisse, Deutsche Bank, JP Morgan, Macquarie and UBS.
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